Does Forbidding Coverage Denial Increase Health Insurance Rates?
Posted: Wednesday, April 21, 2010
by Yamileth Medina
VitalOne Health
One of the most important elements of the recently passed healthcare reform legislation is the provision that will eventually prevent health insurers from denying coverage to people with pre-existing conditions. Although that aim is generally popular with the public, it has not been favored by the industry. That is because their business model is predicated on collecting monthly premiums from as many healthy people as possible, while paying out the fewest amount of claims they can get away with.Unfortunately, there are some indicators that the future may not be so bright. Although individuals and families with pre-existing conditions as serious as multiple sclerosis and cancer are able to buy coverage, it is often forbiddingly expensive. Health insurance companies are forced to increase their rates to tens of thousands of dollars annually in order to break even.
Why is this happening? The requirements for coverage have helped make policies in New York state so expensive, that anybody who can possibly get away with being uninsured has dropped their coverage. After all, they are able to purchase coverage again if they get sick.
Therefore, the people who remain insured are those most likely to file a greater number of expensive claims. In order to cover those costs, premiums must go up. It eventually becomes a vicious cycle. As unpopular as the federal health insurance mandate is, New York is an example of why such a provision is necessary. Otherwise, the theorized increased access defeats the purpose of insurance: spreading costs and risk among a larger population.
There are other factors: a health insurance plan sold in New York must meet far more stringent requirements and cover more conditions than in the vast majority of other states. In addition, medical costs are generally higher. The state also agreed to deregulate insurance rates within certain guidelines, in order to gain the health insurance industry's cooperation.
Granted, New York law goes further than the federal law in several respects. It does not allow insurers to charge different rates based on age at all, whereas the national legislation allows a limited multiplier (albeit a smaller one than most companies use). The state also forbids insurers from charging different rates to smokers than nonsmokers. Unlike pre-existing health conditions, which are not always in a person's control, the federal bill actually allows for greater flexibility in offering wellness incentives for policyholders to get healthy.
Sadly, New York is an example of how the best intentions to provide affordable health insurance may end up putting coverage even further out of reach.
(Image: Tony the Misfit under CC 3.0)
Yamileth Medina is an up and coming expert on Affordable Health Insurance and Healthcare Reform. She aims to help people realize that they can find a quality health insurance plan right now. Yamileth lives in Miami, FL.
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